Legislature(1993 - 1994)

01/28/1994 09:15 AM FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                    SENATE FINANCE COMMITTEE                                   
                        January 28, 1994                                       
                            9:15 a.m.                                          
  SFC-94, #8, Side 2 (574-090)                                                 
  CALL TO ORDER                                                                
  Co-chair Drue  Pearce convened the  meeting at approximately                 
  9:15 a.m.                                                                    
  All  committee  members  (Co-chairs  Pearce  and  Frank  and                 
  Senators  Jacko, Kelly,  Kerttula, and  Sharp) were  present                 
  with  the exception of Senator Rieger who arrived soon after                 
  the meeting began.                                                           
  ALSO  ATTENDING:    Senator  Randy Phillips;  Randy  Welker,                 
  Legislative  Auditor;  Nancy  Slagle,   Director  of  Budget                 
  Review,  Office  of  Management  and  Budget;  Mike  Greany,                 
  Director,  Legislative   Finance  Division;  and   aides  to                 
  committee members and other members of the legislature.                      
  SUMMARY INFORMATION                                                          
  SB 243  - FOUR DAM POOL TRANSFER FUND                                        
            The bill was HELD in committee pending an overview                 
            of the operating budget for the Dept. of Community                 
            and Regional Affairs.                                              
  SB 246 -  REIMBURSABLE SERVICE AGREEMENTS                                    
            Discussion  was  had  with   Nancy  Slagle,  Randy                 
  Welker, and         Mike  Greany.   CSSB  246 (Finance)  was                 
                      REPORTED  OUT of  committee  with a  "do                 
                      pass" recommendation, a new title, and a                 
                      zero     fiscal     note     from    the                 
                      Governor/Office   of    Management   and                 
  SB 247 -  STATE LEASES & LEASE-PURCHASE FINANCING                            
            Discussion was  had with  Randy Welker.   A  draft                 
            CSSB 247 (2d Fin), "O"  version was adopted.   The                 
            bill was then HELD in committee for development of                 
            more  restrictive  title  language   and  possible                 
            amendment regarding standard leases.                               
  SB 243 FOUR DAM POOL TRANSFER FUND                                           
  Co-chair Drue Pearce advised of a request from Senator Sharp                 
  that SB 243 be scheduled for hearing following the  overview                 
  of the Dept. of Community and  Regional Affairs budget.  The                 
  bill was thus HELD in committee for later discussion.                        
  SB 246 REIMBURSABLE SERVICE AGREEMENTS                                       
  Co-chair Pearce  directed  that SB  246  be brought  on  for                 
  discussion.  NANCY SLAGLE, Director of Budget Review, Office                 
  of Management and  Budget, came before committee  to present                 
  an amendment.  Senator Randy  Phillips sought concurrence in                 
  the amendment from  the Legislative Auditor and  Director of                 
  Legislative Finance.   Mrs. Slagle explained that  the first                 
  provision  of  the   amendment  removes  redundant  language                 
  prohibiting use  of RSAs  to merely  transfer money  between                 
  appropriations.  That prohibition is covered in the previous                 
  sentence of the legislation.                                                 
  (Senator Rieger arrived at this time.)                                       
  The second change within the amendment eliminates subsection                 
  (2)  wording  requiring that  the  agency that  provides the                 
  service have authority, by  law, to do so.  The change would                 
  provide  flexibility  in  areas  where  an  agency  provides                 
  certain  expertise  but  may  not  have  specific  statutory                 
  Mrs. Slagle  said that the remainder of the amendment simply                 
  provides a better flow of bill  language.  She then directed                 
  attention to subsection  (2)(A) of  the amendment and  noted                 
  need to correct a typographical error by replacing "of" with                 
  RANDY WELKER, Legislative Auditor,  came before committee in                 
  response to  questions from  Senator Kerttula.   Mr.  Welker                 
  explained that the bill attempts to curtail past RSA  abuses                 
  highlighted by an  audit of the  Dept. of Health and  Social                 
  Services.    Statutory  clarification is  needed  concerning                 
  allowable uses of  reimbursable service agreements.   An RSA                 
  should  only provide reimbursement for a  service.  The bill                 
  attempts  to  cut off  potential  transfer of  funds between                 
  appropriations  under  the  guise  of  an  RSA.    There  is                 
  presently  no   statutory  language  that   addresses  these                 
  agreements.    The  proposed bill  would  "put  some  . .  .                 
  direction in statute."                                                       
  Responding to an earlier question from Senator Phillips, Mr.                 
  Welker said that amendment language proposed by OMB poses no                 
  significant problem.  Legal authority language proposed  for                 
  removal is an inherent requirement for use of an RSA.                        
  MIKE   GREANY,   Director,  Legislative   Finance  Division,                 
  concurred  in  comments  by  Mr.  Welker that  the  proposed                 
  amendment would  present no problem.  Mr.  Greany next noted                 
  that  when   the  bill  was  previously   before  committee,                 
  questions  were  raised  concerning legislative  ability  to                 
  continue  to  make  necessary  transfers within  the  annual                 
  budget  document.    Subsequent  review  has  not  evidenced                 
  problems in that area.                                                       
  Senator   Rieger   commented  regarding   subsection  (2)(B)                 
  language relating to cost allocation methods and asked if it                 
  provides a loophole.   Mr. Welker acknowledged  the concern,                 
  but questioned whether there was any way to totally preclude                 
  intentional circumvention.  It will be incumbent upon OMB to                 
  critically  review proposed cost  allocation plans to ensure                 
  that they  have a  rational basis  in cost.   Bill  language                 
  identifies  and places  responsibility  for approval  of the                 
  plan with OMB.                                                               
  Senator Frank MOVED  for adoption  of amendment no.  1.   No                 
  objection having been raised, amendment no. 1 was ADOPTED.                   
  Co-chair  Pearce  noted that  the  title of  the legislation                 
  appears to be  broad.  Senator  Rieger concurred in need  to                 
  limit the title to reimbursable service agreements.  Senator                 
  Kelly MOVED to tighten and clarify  the title.  No objection                 
  having been raised,  amendment no. 2, to restrict the title,                 
  was ADOPTED.                                                                 
  Co-chair  Frank MOVED  that  CSSB  246 (Fin),  incorporating                 
  amendment no. 1 and the conceptual title change of amendment                 
  no. 2,  pass from committee with  individual recommendations                 
  and the accompanying zero fiscal note.   No objection having                 
  been raised,  CSSB 246 (Fin)  was REPORTED OUT  of committee                 
  with a unanimous  "do pass"  recommendation, new title,  (An                 
  Act  permitting the use  of reimbursable  service agreements                 
  and other agreements  between state agencies to  finance the                 
  provision  of  services  if  the  agency that  requires  the                 
  service has  the authority to obtain or  provide the service                 
  and has an appropriation  that may be used for  that purpose                 
  and if the agency that provides the service bills the agency                 
  administering the funds available for  that service based on                 
  the actual cost to provide the  service or a cost allocation                 
  method  approved by the office of management and budget) and                 
  zero fiscal note from the Office  of Management and Budget.                  
  SB 247 STATE LEASES & LEASE-PURCHASE FINANCING                               
  Co-chair  Pearce directed  that  SB 247  be  brought on  for                 
  discussion  and  further  directed   attention  to  a  draft                 
  committee substitute (8-LS1447\O, Chenoweth,  1/27/94).  Co-                 
  chair Frank  explained that the  bill was introduced  by the                 
  Legislative Budget and  Audit Committee to require  that the                 
  judicial branch bring lease-purchase arrangements before the                 
  legislature for  approval.   Statutes presently  provide the                 
  court  system  the   opportunity  to  enter  lease-purchases                 
  without legislative approval if annual  debt service is less                 
  than $1 million.                                                             
  The Co-chairman noted that the bill was previously heard and                 
  reported  out of  committee before  it was  learned that  it                 
  "deauthorized  the  authorization  to lease-purchase  a  new                 
  court facility in Fairbanks."  That project meets the intent                 
  of the  bill since the  facility was previously  approved by                 
  the legislature.  It should not  be unapproved at this time.                 
  Co-chair Pearce  noted that the  present draft  incorporates                 
  earlier technical amendments  made by  committee at page  6,                 
  line  14, and page 7,  line 7, were  acquisition was tied to                 
  "real property."                                                             
  Senator  Kelly  asked  how  the  bill  would  apply  to  the                 
  University's  purchase  of  an off-campus  office  building.                 
  RANDY  WELKER,  Legislative   Auditor,  again  came   before                 
  committee.   He  explained  that if  the  University has  an                 
  appropriation  and  legal  authority  to   pay  cash  for  a                 
  building, the subject bill would not apply.  It applies only                 
  to financing agreements that require an annual appropriation                 
  for debt service.  Co-chair  Pearce voiced her understanding                 
  that  it  would affect  the  University if  a lease-purchase                 
  arrangement  was  entered  for  the  building.   Mr.  Welker                 
  Senator Kerttula voiced concern over  lease costs associated                 
  with rental of office space such as the Frontier Building in                 
  Anchorage.  He attested to need for legislative oversight of                 
  standard  lease  arrangements  that obligate  the  state  to                 
  sizable annual  payments.  Senator  Phillips suggested  that                 
  since  he  and   Senator  Frank  sit  on   the  subcommittee                 
  overseeing  the   leasing  budget   within   the  Dept.   of                 
  Administration,  that  the  issue  be  reviewed  within  the                 
  context of that  budget.   Co-chair Frank concurred,  noting                 
  that if the  state is  leasing a facility  long-term, it  is                 
  preferable  to eventually own  it.  Leasing  comprises a $32                 
  million item in the Dept. of Administration budget.  Senator                 
  Kerttula suggested that leases for  which the annual cost is                 
  over $500.0   and the term is longer than three years should                 
  be  brought before  the legislature for  approval.   He then                 
  voiced his  belief that  the proposed  bill might  encourage                 
  long-term leasing over lease-purchase.                                       
  Discussion followed  regarding automobile leasing.   Senator                 
  Phillips asked that  Senator Kelly submit a  formal, written                 
  request for audit review.                                                    
  Co-chair Pearce called for objections to adoption of the "O"                 
  version of  CSSB 247  (2d Fin).   No  objection having  been                 
  raised, CSSB 247 (2d Fin) was ADOPTED.                                       
  Discussion  followed  regarding impact  of  the bill  on the                 
  recent purchase  of the Court  Plaza Building in  Juneau and                 
  the Anchorage  Times Building  in Anchorage.   Randy  Welker                 
  advised that it would not impact  the Court Plaza.  Purchase                 
  of the Times  Building is  presently a fluid  process.   The                 
  transaction has not yet closed.  It is, however, more likely                 
  than not to  be concluded before  the effective date of  the                 
  proposed bill.  Co-chair Frank explained that it was not the                 
  Legislative Budget and Audit Committee's  intent to deny the                 
  purchase.     Further  discussion   of  the  Times  Building                 
  transaction followed.                                                        
  Co-chair Frank noted need  to tighten the title of  CSSB 247                 
  (2d  Fin)   to  include   wording  limiting   lease-purchase                 
  arrangements and requiring  legislative approval.   He  then                 
  MOVED  for  adoption of  a  conceptual amendment  to tighten                 
  title  language.    No  objection  having been  raised,  the                 
  amendment was ADOPTED.                                                       
  Senator Rieger  noted that the  bill speaks  to both  lease-                 
  purchase financing and  standard leases.  He  then suggested                 
  that,  in  light  of concerns  raised  by  Senator Kerttula,                 
  provisions  pertaining  to standard  leases,  at page  5, be                 
  strengthened prior to transport of the bill to the floor.                    
  Senator Kelly asked why language set  forth in the letter of                 
  intent was not incorporated within the bill.  Co-chair Frank                 
  explained  that  while  it   was  felt  it  would   be  more                 
  appropriate for DOTPF rather then DNR to hold title, manage,                 
  operate and  maintain state  facilities, the  intent was  to                 
  provide some  flexibility and  not fix  that requirement  in                 
  statute.  DOA  currently oversees  standard leases and  thus                 
  has an interest in the process as well.                                      
  Co-chair  Frank  MOVED  that CSSB  247  (2d  Fin)  pass from                 
  committee with individual recommendations.   He then advised                 
  that he would have no problem  holding the bill in committee                 
  for possible  amendment  of language  relating  to  standard                 
  leases.    Senator  Rieger  voiced  need  to  address  lease                 
  payments  that  are  disproportionate to  the  value  of the                 
  building.    Senator Phillips  said  he  would take  on  the                 
  project over the weekend and return to  committee on Monday.                 
  Co-chair Frank  then WITHDREW  his motion  for passage,  and                 
  CSSB 247 (2d Fin) was HELD in committee.                                     
  Co-chair  Pearce  directed  that  the  meeting  be  recessed                 
  pending  arrival  of  the  Commissioner   of  the  Dept.  of                 
  Community and Regional Affairs.  Commissioner Blatchford was                 
  precluded  from  returning  to  Juneau on  this  date.   The                 
  meeting was, in effect, adjourned at approximately 9:55 a.m.                 

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